RBI fights rupee fall, frees NRE and NRO deposit rates

The Reserve Bank of India (RBI) on Friday freed regulations on interest rates on non-resident deposits both NRE and NRO with an immediate effect to attract more dollars in the country and to prevent rupee depreciation.

The rupee has been depreciated more than 20% against US dollar this year, which has raised concerns for the policy-makers.

The rupee on Thursday crossed a 54-mark, which resulted into more tensions for the RBI. On Friday, RBI intervened in currency market and imposed restriction on forward trading contracts so as to curb further fall in Indian Rupee.

The RBI said that the banks are free to determine the interest rates on savings and term deposits to encourage more dollars in the country.

Until now, there was cap on such deposits – London Inter-Bank Bid Offer Rate plus 100 bps, which has been abolished now by the RBI.

The move will attract investors abroad to save in our economy, who don’t earn much interest in other economies.

The RBI has said the revised deposit rates will be applicable only to fresh deposits and on the renewal of maturing deposits.